The Hershey Company (HSY -1.25%) is heading into the autumn months with the tailwinds of pricing power and seasonal demand. The one stat that makes the company hard to ignore right now is its revenue growth relative to cocoa costs, which have increased by more than 120% in the past six months.
NYSE: HSY
Key Data Points
One might think a triple-digit rise in the cost of a core ingredient would hurt business, but the company's second-quarter earnings showed net sales up 6.6% year over year. Adjusted earnings per share in Q2 rose a whopping 57% in the same time period. This demonstrates Hershey's brand strength and its ability to price products without scaring off customers.
Hershey's research found that 82% of parents are likely to purchase chocolate in October, and intend to buy gummies and sour candy even earlier in the season. In response, management is planning a "Hersheyween," which runs from the end of the summer into the fourth quarter. The promotion is Hershey's largest-ever Halloween lineup.
Image source: Getty Images.
Hershey's stock trades at a slight premium to some of its peers in the packaged-goods industry, but the sweets company offers a tasty 3.2% dividend yield and decades of consistent payouts. Hershey is currently well below its 52-week high of $239. The stock is relatively flat year to date.
So is Hershey a good buy? Yes, for income-focused investors, it's quite a reasonable one. Its dividend is reliable, and thus far, cocoa prices haven't driven consumers away. As we head into prime chocolate season, Hershey is ready to devour the market.
